Canada tests 'basic income' effect on poverty amid lost jobs

Ontario intends to provide a basic income to 4,000 people in three different communities as part of an experiment

In the experiment anyone unemployed or with an annual income below 34,000 Canadian dollars ($26,000) is eligible to take part in the program

A streetcar on the intersection of King Street and University Street in Toronto, Ontario.

Getty Images

Former security guard Tim Button considers how a sudden increase in his income from an unusual social experiment has changed his life in this Canadian industrial city along the shore of Lake Ontario.

Sipping coffee in a Tim Horton's doughnut shop, Button says he has been unable to work because of a fall from a roof, and the financial boost from Ontario Province's new "basic income" program has enabled him to make plans to visit distant family for Christmas for the first time in years. It has also prompted him to eat healthier, schedule a long-postponed trip to the dentist and mull taking a course to help him get back to work.

"It's making a huge difference for me," Button said of the almost 60 percent increase in monthly benefits he started receiving in October from the Ontario government.

Ontario intends to provide a basic income to 4,000 people in three different communities as part of an experiment that seeks to evaluate whether providing more money to people on public assistance or low incomes will make a significant material difference in their lives. How people like Button respond over the next three years is being closely watched by social scientists, economists and policymakers in Canada and around the world.

"Does it produce better outcomes in terms of education for the kids? Does it produce better health status after three years of this kind of living? Does it produce better affinity with the work place if there is not a total disincentive to work?" said Hugh Segal, a former Canadian senator consulted by the Ontario government for the pilot project.

In the experiment anyone unemployed or with an annual income below 34,000 Canadian dollars ($26,000) is eligible to take part in the program. Single people receive up to 17,000 dollars ($13,000) of basic income and they can keep half of what they earn from working. Canadians on welfare normally would have to subtract all of what they earn from their monthly benefit, so this is considered an incentive to work. Couples get 24,000 dollars ($19,000).

The idea is getting renewed interest amid concerns that technology will eliminate many jobs in the future. Technology leaders such as Facebook CEO Mark Zuckerberg and Tesla founder Elon Musk have promoted the idea as a way to address the potential loss of jobs to automation and artificial intelligence.

Ontario Premier Kathleen Wynne said the experiment here is rooted in a fear there will be a mass dislocation of jobs not seen since the Industrial Revolution that governments will have to address.

"I see it on a daily basis. I go into a factory and the floor plant manager can tell me where there were 20 people and there is one machine," Wynne said. "We need to understand what it might look like if there is, in fact, the labor disruption that some economists are predicting."

Finland is conducting a similar experiment, distributing money to 2,000 randomly selected people. It hopes to learn how it might adapt its social security system to a changing workplace, incentivize people to work and simplify the bureaucracy of benefits. It also being tried on a smaller scale in Oakland, California.

David Wakely, a labor lawyer, said it sounds like a great idea, but he doubts it could be rolled out on a larger scale.

"I just don't think it's affordable," Wakely said. "The numbers are just completely unmanageable. The expense of this thing is huge. It is monumental."

Wakely thinks it would create a disincentive to work. Other critics say it doesn't result in any meaningful change and is only a backdoor way to eventually cut other benefits.

Officials running the program in Ontario have found that some people are reluctant to participate, fearing a hidden catch or being caught short when the grant runs out. So far, 400 have volunteered and have begun receiving the increased benefits. It's too soon to gauge whether it has substantially changed their lives.

But Elizabeth McGuire, who heads the Campaign for Adequate Welfare and Disability, has seen a transformation in former welfare receipts already.

"It's like they burst out of their cocoon and become people," McGuire said. "Moving to a compassionate system that gives you enough money where you can grocery shop, buy a winter coat and get some boots, too. That has made such a psychological difference in the mental positioning of vulnerable people."

Dave Cherkewski, a 46-year-old in Hamilton, says the extra $750 a month he is receiving has eased the stress of daily life and mental illness that has kept him out of work since 2002.

"I've never been better after 14 years of living in poverty," he said.

Cherkewski dreams of returning to work in a role where he can help people with mental health challenges.

"With basic income I will be able to clarify my dream and actually make it a reality, because I can focus all my effort on that and not worry about, 'Well, I need to pay my 520-dollar rent, I need to pay my 50-dollar cellphone, I need to eat and do other things,'" he said.

Jodi Dean, a 44-year-old mother of three whose 10-year-old daughter, Madison, has epilepsy and severe osteoporosis, received her first basic income check in October and said the extra money gave her family "the breathing room to not have to stress to put food on the table."

Button acknowledges difficulties adjusting to his new windfall.

"I'm having anxiety, panic attacks since I got this. I'm not afraid to say it," he said.

But Button said that since he got his first check he is no longer sitting around his tiny apartment depressed.